WAM- Legal Column, July 2001

Legal Column, July 2001
by Rosario Perry

OUTRAGEOUS GOINGS ON AROUND TOWN

Welcome to July 2001. It is hard to believe that what started out as a temporary emergency measure on April 10, 1979 (a date that will live in infamy) would still be alive and kicking today, some 22 years later. It shows the power of the people in search of a free lunch at the expense of the housing providers of our City. The injustice that is done in the name of the poor people of our city is disgraceful; especially since only 1 in every 10 apartment units has a qualifying low income tenant residing there. Our suffering is long and hard, and there is no respite in sight.

SANTA GREENSPAN IS STILL ALIVE AND WELL
In the last few issues we have been urging all our paid-up subscribers to refinance and obtain fixed-rate, long-term new loans. The reason for this is that the interest rates seem to be at the lowest ever for many a year. However, the low interest rates will not last for too much longer. There are many factors (especially on the international level) which could force Greenspan to reverse his policy and raise interest rates. Furthermore, Greenspan's setting of the Federal Rate does not necessarily dictate what local banks will offer in rates. Many local banks have decided to keep their rates higher (a little interest rate gouging of consumers) to take advantage of the larger than normal spread between the Fed Rate and the consumer lending rate. Thus you must do some serious shopping to get the best possible (lowest) rate. Look for a 15 year rate (it should be around 6.5%) and lock it in.

RENTS R US
What are local rents doing at this time? The Board has released data showing all registrations of all rent controlled apartments new rentals during the time period January 1, 2001 through May 31, 2001. ACTION has digested the raw data and prepared an updated report. Study this report to see what your rents should be. It may be that your asking prices are too low or too high. Don't forget you want to register your units within 30 days of their re-rental so that the Board will adjust their MAR database to reflect your higher rents.

In this way, if later the State law changes, and allows the Board to re-institute vacancy re-control (i.e. no market rate increases at vacancy) then at least you have solid increases in your MARs on some of your units, which will stay with your building for the rest of its life. Kuehl's Busy At Work In Sacramento Ruining Your Day The latest word from Sacramento is that Sheila Kuehl's bill (SB 985) amending Costa/Hawkins will pass into law. Don't ask us why it is needed. Kuehl's bill will do two things: First, it will require that a notice to a tenant to vacate (either from a rent controlled unit or an exempt unit) be given at least on 90 days prior to the termination date. Current law requires 30 days. Second, it will amend Costa Hawkins as it relates to condominiums to take away the single-family protections of the law as to unsold condominium units. Under current law, an owner of a condominium could increase the rent to existing tenants on a 30-day or 60-day notice. The Tenant did not have his / her rent levels protected. Kuehl wants to change all that in the following way. For all unsold condominium units (i.e. units in a new or converted structure, where the developer decided to rent the units out rather than selling them to individual buyers) the owner may not increase the current tenant's rent. That tenant would have the same rent control protection as a tenant who lived in an apartment unit. Kuehl believes that this will some how save tenants in place, but all it will do is force these owners to now sell their condominium units on the open market to home buyers. These home buyers will then displace the tenants and move in. This will increase the shortage of rental housing in our state. Thus Kuehl continues her misguided jihad against the free market system and the property owners of our State. When the rental market tightens up immediately after her law passes (and before it takes effect on January 1, 2002) she will blame someone or something else. Look homeward angel! Before it's too late.

MOLD IS COMING TO SANTA MONICA
It's not something that we have done a study on, but mold is something that's just in the air. It's everywhere and on everyone's mind. It's the new fad. In May, the Delaware Supreme Court upheld a $1.04 million award to two women whose landlord failed to address leaks and mold problems in their apartments, resulting in asthma attacks and other health problems. In December, during trial a homeowner settled a mold-related bad-faith lawsuit against his insurer for $1.5 million. In October, a homeowners' group settled, toxic mold claims against builders and contractors for $1.3 million (that was in Ventura County). In one of the first big mold cases, a Florida county sued the architect and builders of its $13 million courthouse, claiming that construction defects led to a problem that sickened 15 workers. After a trial in 1996, a state court jury awarded the county $11.5 million, which, adding in attorneys' fees and settlements with some of the defendants, exceeded the building's cost. So what can we do about it? Luckily, there is no (not yet at least) overburdening governmental regulation about how to eradicate mold. At the present time, you should be pro-active. Take a tour through your building and look for signs of mold in your tenants apartment units. Mold likes to grow in showers (where tenants forget to clean) and in dark damp places. There are a number of good companies that specialize in cleaning up mold. You do NOT need a consultant, you need a worker group to come in and wash up. If you do see mold, don't wait for the tenant rent decrease hearing complaint to do something about it. Treat mold as a leaking pipe. A stitch in time saves nine. Mold grows, and the sooner you get rid of it, the less of it there will be to get rid of, and the cheaper it will cost overall. There have been a rash of cases (tenants v. landlords) where tenants have been awarded damages in the millions of dollars. Don't be a victim of such a suit. The very scary part about this all, is that now some insurance companies are claiming that since mold is a toxic (or pollutant) that their insurance policy will not cover damages mold causes to tenants. So there you will be, no insurance and a million-dollar lawsuit.

The Game is afoot, or is it on the other foot.

Remember SMRPH? The new charter amendment, which if passed will allow owners and tenant to convert their buildings to condominiums? Well it obtained sufficient signatures to qualify for submission to the voters of our City. The City Council, hating the idea that renters may some day be homeowners, have stalled placing it on the ballot, hoping that the passage of time will dampen spirits about it. However, recently the City Council tentatively passed the new Living Wage Ordinance (hereinafter "LWO") and living for whom, you may ask? Well a broad based citizens group called FAIR (Fight Against Irresponsible Regulation) has vowed to subject the LWO to a vote of the people of our City. This procedure is called a "referendum" to the people. In other words, if the opponents of the LWO obtain approximately 5,600 signatures (out of 65,000 people qualified to sign) then the LWO will have to be approved by the voters of our city before it becomes law. Now the reason we are mentioning all this is that when the City Council places the LWO on the ballot for the people to vote on, then they have to place the SMRPH initiative on the ballot at the same time. All this can happen as early as this coming November 2001. The SMRPH initiative is one of the best-written laws to be placed before the voters in a long time. If passed, it will allow owners to convert their units into condominiums and sell those units to their tenants. It is anticipated that some 3,000 to 4,000 condominium units will be sold under SMRPH, and that means more homeownership opportunities for renters in our City. The SMRR political party machine (and not be confused with SMRPH) does not want its rank and file members to be home owners. This of course is very hypocritical, in that almost all SMRR leaders own their own homes. Why is it that all the SMRR leaders live in houses they own, while they preach the wisdom of being a renter for life? It sounds too much like the book Animal Farm where the pigs' mantra was: "four legs good, two legs bad" to be a coincidence. Was George Orwell thinking of SMRR when he wrote his book, or was he just thinking about the universal trait of hypocrisy that runs strong in all forms of totalitarian governments?

THE UN-LIVING WAGE ORDINANCE
On May 23, 2001 as we stated above, the City Council tentatively passed its Living Wage Ordinance (LWO). It requires, starting July 1, 2001 that companies grossing more than 5 million yearly, to pay their employees at least $10.50 an hour (unless the company has a union contract). The business must be within the beach area (west of Fourth Street). It is estimated that there will be 72 businesses and 2,400 workers covered by this new law. Of course there is an exemption / hardship clause in the law, which will be used to allow all restaurants to opt out of the coverage. This law is basically seen as a targeted attempt to bankrupt the beach hotels, all of whom SMRR hates. The final version of the bill should be passed within the month, and will include City employees.

RECENT STATE WIDE COURT DECISIONS
In Saelzler v. Advanced Group 400, the California Supreme Court ruled in a 4 to 3 decision in favor of the property owner on the issue of tort liability for 3rd party criminal acts committed on the owner's property. This case brings to a rest for the time being, the question of the owner's responsibility (i.e. does the owner have to pay an injured tenant or guest who gets attacked by a criminal while on the owner's property). In the past, victims of crime have sued the owner for lack of proper security measures, ranging from inadequate gates, locks, lighting, or absence of guards, video camera, and the like. The Supreme Court has held that for the victim to win against the owner, the victim must prove that the specific reason the victim was attacked, was directly caused by the inadequate security measure. Thus lack of lighting will not in itself impose liability, unless the victim can prove that but for the lack of proper lighting the crime would not have been committed. In Saelzler, the plaintiff attacked by 3 men while on the owner's property, but the court held that the plaintiff could not prove that but for the allegedly faulty locking gates and / or lack of security guards, she would not have been attacked. The Court stated that since the plaintiff did not know her assailant, could have been tenants at the property, and locking gates would not have stopped them from coming onto the property.

In Kolodge v. Boyd, the appellate court held that a party to a real estate sales transaction could be responsible to the lending bank, for negligent or intentional misrepresentation, if the Bank loses money on its loan after a non-judicial foreclosure sale. This is scary for many reasons, and sellers must be very careful not to get caught in the liability trap, when the buyer loses the property to the bank. In Kolodge, the lending broker was held liable for giving the bank false information about the appraised value of the apartment building. When the bank took the property back, it could only sell if for 60% of what it lent the buyer. The problem with this case is that it can be used to impose liability on the seller for anything that the seller tells the bank (or the bank's agents) either orally or in writing. Also beware as a seller of trying to help out the buyer by increasing the purchase price with cash back to the buyer at close of escrow. Any arrangement a seller enters into with the buyer without proper disclosure to the lender could subject the seller to liability to the bank for that secret conduct. As a seller, do not make any representations, to any party to the transaction. Be very careful not to respond to the lender or its agent's request for information without first speaking to an attorney.

RECENT RENT SURVEY FOR SANTA MONICA APARTMENT RENTALS
ACTION has just completed its rent survey based on statistics published by the Rent Control Board of Santa Monica. The statistics cover all market rate rentals from January 1, 2001 through May 31, 2001, for Rent Board areas A through G. There are approximately 850 filled vacancies reported in the raw data. The raw data is available to ACTION members through our office for cost of printing. Portions of the report can also be found in the Members Only section of our on - line newsletter. Call the ACTION office to get your copy of the current rent study. Don't rent your units without knowing what is happening in your neighborhood.

Life is over too quickly to worry about getting old.